Gulf of Oman ship-to-ship transfers hit capacity as Saudi exports surge

Ship-to-ship transfers of Middle Eastern crude in the Gulf of Oman have reached their operational limits after Saudi Arabia redirected exports away from the Red Sea, according to trade sources and analysts.

Saudi crude exports through the Strait of Hormuz are on track to rebound to 3.6 million barrels per day in September, up from roughly 900,000 bpd in August, data from analytics firm Kpler showed. The increase follows the September 13 attack on the East-West Pipeline, which halted exports from the Red Sea port of Yanbu.

State-run Saudi Aramco has sold more than 60 million barrels of crude for STS transfer off Sohar, Oman, this month and next, the sources said.

The nearly 3 million bpd rise in Saudi flows through Hormuz would require between 36 and 40 additional very large crude carriers, according to Kpler analyst Panagiotis Krontiras. Each VLCC can carry 2 million barrels.

Anoop Singh, head of global shipping research at commodity broker Oil Brokerage, said the number of extra VLCCs needed to move the same volume of oil has risen to 40 this month from 24 in August. He added that about 20 more VLCCs are effectively stranded in the Mediterranean awaiting Yanbu's return to service.

The surge in tanker demand drove the daily time charter rate for a VLCC delivering Middle East oil to China to a record $1.27 million on Monday, LSEG data showed.

The ramp-up in Saudi volumes comes on top of rising exports from other Gulf suppliers such as Iraq and the United Arab Emirates, which are also using STS services outside Hormuz. That has created queues for equipment such as tugboats and labour.

Before the Iran war, most oil cargoes from Gulf producers other than Iran were typically lifted directly by buyers. Vortexa analysts said in a September 21 note that VLCC STS operations have struggled to keep pace, with STS volumes for crude loaded west of Hormuz holding around 6 million bpd since late August — roughly three VLCC pairs starting transfers daily.

"Congestion is getting worse near the Strait of Hormuz due to long STS queues," Vortexa analyst Emma Li said, adding that an STS operation now takes nearly 10 days, up from five to seven previously.

The delays have prompted Chinese buyers to seek alternative STS locations off India's west coast or Malaysia, or to request direct delivery to refineries, Li said.

The Bahri-operated VLCC Gold Shine, which loaded 2 million barrels of Saudi crude from Ras Tanura earlier this week, was headed to Quanzhou in eastern China, according to Kpler and LSEG data. Sinochem and Fujian Refining, partially owned by Saudi Aramco, operate separate refineries near there.

Bahri did not respond to a request for comment, while Saudi Aramco declined to comment.

South Korean refiner S-Oil, majority-owned by Aramco, is sending two VLCCs to conduct STS off Vadinar on India's west coast, a trader active in the Middle East crude market said. S-Oil did not respond to a request for comment.

A tanker owner tracking activity in the Malacca Strait said crude cargo transfers off Malaysia's Linggi transshipment hub have increased recently. A Singapore-based shipbroker covering the crude tanker market said it could be cheaper for supertankers to discharge into smaller vessels that then carry cargoes to North Asia than to ship oil directly on large ships.